Buy Bharti Infratel; target of Rs 285: Dolat Capital Market

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Dolat Capital Market's research report on Bharti Infratel

Bharti Infratel (BHIN) Q2FY21 was operationally healthy lead by strong tower additions, tenancy growth and rental/tenant. Energy spread was negative for 2nd consecutive quarter. BHIN’s short-term prognosis remains significantly positive led by potential tariff increase in the telecom sector and/or fund-raise by VIL. More importantly, BHIN-Indus merger would conclude within a month and the combined entity would declare a dividend of Rs 48bn (Rs 17.8/sh ~9.5% yield) within 3Ms. We have marginally increased our estimates to factor in the robust growth.

Outlook

Reiterate BUY with revised TP of Rs 285 @ 15x Sep-22E EPS.  The medium-term risk for BHIN are wrt survivability of VIL. Shutdown of VIL may significantly impact the business of BHIN. For BHIN+100% Indus it may lead to ~40-45% reduction in tenancies in our view. However, we don’t foresee it playing out over next 18-24m. Risk of reduction in rentals/tenant on renewals as tenancies come out of lock-in in FY23 (similar to energy spread correction) is another key risk.

For all recommendations report, click here

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